Microsoft did some smart things last week when it announced its Dynamics CRM Online service. Most of the headlines will focus on the teaser rate or introductory pricing of only $34 per seat-month for 12 months. Until June, users of Oracle CRM On-Demand and Salesforce who switch will have an added inducement of up to $200 per user, which everyone acknowledges ought to go to conversion costs.
There are other reasons to be charmed by Dynamics CRM Online which we can review below but the emphasis on takeaways leads me to ask the question — is the CRM market becoming saturated? In a saturated market that’s typically what vendors do — keep the installed base happy and try to poach from the other guy.
But CRM doesn’t look saturated to me. Just last week I was speaking with a company that had built its own solution and was looking for help selecting something more standard. It is surprising how many companies like that are still out there. With big analyst firms predicting double-digit growth and many billions in sales for CRM over the next several years, I think I am in good company when I say saturation is not on my radar.
But that’s not to say that some amount of switching inducement is not in order. For instance, Greg Gianforte, CEO of RightNow, told me recently that in his area of focus, the service center, there’s good switching activity in part because many of the service center vendors and their products from the client-server era are reaching end of life. Some vendors haven’t kept up, some are out of business or taken over, and you can’t do some of the things customers want and need like social, if the vendors haven’t kept up with cloud solutions, for instance. That’s not Microsoft’s issue.
Also, Microsoft representatives have told a similar tale about aging back office systems and a shift now happening to retire older systems. So, perhaps for the first time in this cloud- and browser-based era there are significant reasons for companies to consider swapping out their front and back office systems.
But that’s all back office and service systems. What about sales and marketing? Pure SFA has never been a box office favorite with the masses. Early systems didn’t provide enough value to the end user and eventually, even managers determined that the amount of information coming from first generation SFA was lacking. But SFA has been increasingly saved by the efforts of people in the marketing automation business.
Marketers were arguably the first in the front office to see the promise of social media and to take advantage of it. The result has been a steady stream of better leads from techniques like lead nurturing and various customer analysis schemes which are supported by vendors like Eloqua, Marketo, SAS and others. Sales seems to be more open to accessorizing than other parts of the CRM suite or perhaps that perception is simply an outgrowth of Salesforce.com’s openness and their AppExchange. Whatever the cause, companies like Cloud9 Analytics have been able to take the raw data out of Salesforce and provide managers with the analysis and real information that SFA systems alone fail to support. The result has been continuous improvement in selling and marketing.
Back to Microsoft Dynamics CRM Online. I suppose they could have found a longer name but this will have to do. I’ll just call it “Online”. Online is a direct challenge to Salesforce and Oracle and employs the same code set, Microsoft CRM Jefe, Brad Wilson, tells me, as the on-premise CRM solution. In fact, about the only thing different is the branding, which I can appreciate. On-line means a SaaS or on-demand product hosted by Microsoft. Partners can host too but they add custom applications and other value add to Microsoft Dynamics CRM.
Partners also adhere to a more standardized form of SLA than they did a couple of years ago but anyone considering a SaaS solution from any vendor ought to read all of the small print. Having an uptime commitment is essential, but it’s not the only thing. For instance, knowing whether the data center is mirrored is important because it impacts how long you’d be down in a worst-case situation. Good back-up is nice but not if you need 48 hours to spin all of the tapes to get back to work. Good news here, Microsoft continues to invest in its datacenters to provide the peace of mind factor for its online products.
Microsoft also launched a Babel of languages — 40 in 41 markets — for Online. That should cover about 110 percent of the world’s business centers, plus Mars if we ever get there. The user interface has many graphical features and dashboards and is highly configurable by the user. It is also well positioned in Microsoft Office integrating with applications like Outlook to take advantage of user familiarity with email.
There is also the concept of a ribbon at the top of the screen that holds a graphical function menu. The ribbon changes with every change of location within CRM. It’s a great way to eliminate irrelevant tabs and bring forward the functions most needed for the work at hand. I like it.
I have not been through the product from stem to stern so there are loads of things I am not going to comment on. But it was difficult to get some information that should have been available. For instance, I run a Mac and I have many browsers but the analyst briefing was conducted using Live Meeting and Internet Explorer so I was locked out. I know Microsoft is sensitive about its standards and wants the world to use its products but this is the Internet and refusing to play nice with the other guys is no way to promulgate a standard. In fact I find this a bit churlish.
There’s no doubt that Microsoft is “all in” as they like to say. Steve Ballmer gave the keynote for the kick off and other senior executives also spoke. All-in-all this is a good effort but from the videos I’ve watched, my impression is that there isn’t enough integration of social media in the business processes demonstrated so, to me, the effort appears to be more 1.x than 2.0. But perhaps I simply missed something because of browser incompatibility.
RightNow Technologies certainly has come a long way in the last ten years and the company used its industry influencers day in Colorado Springs this week to remind us. I saw the day as a marker of a turning point in the company’s development, a time when it said to the world, the first phase of life is over, now let us tell you what’s in store next.
My big takeaways:
- The company is generating cash and will continue to improve margins, which will propel it to its next phase.
- RightNow has staffed up with lots of industry veterans who will help to drive future success.
- RightNow believes its suite of customer service solutions is substantially complete and it will soon begin concentrating on accelerating sales and marketing.
Since this was a day for both industry and financial analysts there was a good amount of discussion about the company’s finances. The men and women in black asked penetrating questions about margins, strategies and how the financial sausage was made. From the answers I deduced that things are good.
Even before CFO Jeff Davison spoke the company had made several announcements including revising its advice to the street about Q3 2010 financials. The unaudited—and don’t hold me to it—numbers look like this: about $48 million in revenue up from advice of $45 million and up 24 percent over the same quarter last year. Not too shabby and apparently I was not the only one thinking this because the stock went north by about three and a half for the day, most of it in the morning.
So the company has good cash flow. But more importantly, more of the cash is margin. According to CEO Greg Gianforte, the company embarked on a four-year plan two years ago to boost its margins. Half way through the exercise it looks like they will hit their target of eighteen to twenty-two percent operating margins. This single example gives me the impression that RNOW is a well-run organization.
Also pre-announced, Wayne Huyard was appointed President and Chief Operating Officer. Huyard has a twenty-five year track record, mostly at MCI, in leading sales and operations and he looks like a good fit for the team. The company has also acquired numerous industry veterans over the past few years injecting significant business experience into all the key areas. We were treated to a panel discussion with the VPs of the centers of excellence later in the morning and each of them knows their stuff.
Beyond Gianforte, Davison and marketing ninja Jason Mittelstaedt other heavies included Brian Kern, VP Web Experience, John Kembel acquired from Best Buy, VP Social Solutions who came over in the HiveLive acquisition, Ted Bray, VP Contact Center, Shon Wedde, Director of Platform Solutions, Chris Hamilton, VP Customer Feedback, and more that my notes don’t cover.
But back to the boss. Before any of the leaders of RightNow’s centers of excellence spoke, Gianforte gave a succinct and well-reasoned overview of the market and his company’s opportunities. He sees a ten-fold growth opportunity for the company in seven verticals making up a universe of about three thousand companies. The sweet spot for this expansion are companies in business-to-consumer, government-to-consumer and higher education-to-student markets.
This universe includes many companies that might be missed by a more traditional call center approach focused on telecommunications and banking (though each is important). Some of RightNow’s most interesting customers such as EA Games are well outside of that box and offer an intriguing peek into the future, not just of RightNow but of our society as we further socialize and become even more addicted to our mobile devices.
Interestingly, in discussing his land and expand strategy Gianforte revealed that the average customer places six to eight orders in the first three years of a relationship—quite an accomplishment for any software company and aided no doubt by the cloud model.
Finally, there are the four drivers Gianforte said are stoking demand—customer empowerment, cloud computing, proliferating online interactions and the contact center replacement cycle. He says all drivers point to adoption of light, lithe and above all smart systems, which the company has worked to deliver.
If there was a fly in the ointment it might have been when the CEO said “The solution is basically done.” Gianforte no doubt meant that the suite of tools needed to support his vision of customer service is complete and he modified the statement to include the idea that there may be additions and acquisitions in the future. But net/net he has the suite he wants to go to war with. This is a significant revelation because in confluence with achieving his operating margin goals, it means the company will soon spend more on sales and marketing. When that happens, look for the company’s growth to accelerate.
So, all in all, RightNow’s influencer meeting was successful in communicating these points and outlining a bright future for the company. RightNow is at a turning point and you can see it. The customers are happy, they continue to buy and the financial analysts apparently liked much of what they heard. As the company completes its objectives for margin and turns its attention to faster growth we could be witnessing the beginning of a spurt that delivers the second billion-dollar cloud company.